Tuesday 3 September 2013

PIBS: Nationwide Slashes and Burns

Slash and burn
The decline of PIBS continues. Many of you who hold Nationwide Building Society PIBS (Permanent Interest-Bearing Shares) will have been informed of the buyback tender recently launched. The buyback basically means: forget the prospectus and what was promised then (in terms of maturity/call date and rate of return) - just take the money and go away!

Unfortunately, this is not the first time that Nationwide has done this - and where the nation's largest building society goes, others will no doubt follow.

Five different issues of Nationwide PIBS can be sold back under the offer. Two, the 6.875% and 7.25% issues, are redeemable at par (face value) and one, the 7.859% version, will net investors more than face or "par" value, as they will be bought back at a 6.5% premium. However, holders of two issues will get back less than par value if they redeem. The 6.25% PIBS will be bought back at 91% of face value, while holders of the 5.769% issue will suffer a 5% discount to par value - although, to be fair, few holders will suffer an actual loss.

My own investment is the 7.25% PIBS and a repurchase at par gives me a 5% capital gain. Still, its the principle that rankles. Building societies constantly trumpet their integrity but are clearly not averse to some major financial jiggery-pokery.

No doubt the idea is to reduce the cost of capital as well as to realign the capital base with the Basel III rules.What puzzles me slightly is where the £715m is coming from to finance the purchase offer.  - not from members or individual investors, clearly.

Nationwide's comment on yet again breaking trust with its providers of capital was pretty self-serving: "The society is inviting holders to tender their securities for purchase as part of its proactive approach to capital management. The offers are expected to improve and strengthen the quality and efficiency of the society's capital base and are designed to provide liquidity to investors. Future decisions with respect to capital calls will be made in light of the then prevailing market, economic and regulatory conditions."

Two other issues of Nationwide PIBS, paying 6% and 7.971%, are not included in the offer. They are callable in 2016 and 2015 respectively. Look out for more tender offers...

I still hold PIBS in the Skipton, Manchester and Principality Building Societies: OK guys - make me an offer!

[Potential sale price: £1.00]

I am not a financial adviser and the information provided does not constitute financial advice. You should always do your own research on top of what you learn here to ensure that it's right for your specific circumstances.


  1. Compared to the Co-op, Nationwide look honourable at 4p above market price. In my portfolio, Skipton are 3 years interest adrift. You don't have to take any tender offer but who knows what the PRA will suddenly discover - Hmmm

  2. And compared to the shysters at the west brom building society NW are paragons of virtue. After rewarding the incompetent Board that ran this building society into the ground by stupopid investments they received generous pension terms. The WBA board then realisedthat most PIBS holders are old age pensioners then disregarded all their promises to PIBS holders and forced through a change that meant PIBS fell to a tiny per cent of their face value and stopped paying interest for the last three years. Incidentally the only people to lose money in the WB building society were PIBS holders. Were they given a vote? Certainly not. The Board then argued that if PIBS were held in nominee accounts the owners of the PIBS shares would not get a vote, nor be allowed to speak at the meetings. What did the IFA do? nothing. The west brom is a disgrace to the building society movement. Anyone complaining was threatened with legal action. Was their action legal? Who knows? the board refuse to share the legal advice they received.

  3. Hi DIY,

    What is your opinion of PIBs sector now, I was thinking of adding to my portfolio of stocks & ETFs.
    Is it best avoided ?


    1. Well, I continue to hold PIBS - and I bought recently. However you need to be extremely wary: do your homework into the health of the BS and probably try not to pay over par for anything.